Lloyds knew of HBOS bank fraud for over a decade: Explosive claim of a cover-up from police commissioner

Top bankers at Lloyds knew about a massive fraud for a decade but bullied victims to try to silence them, a police commissioner has claimed.

Corrupt staff at the Reading branch of HBOS destroyed dozens of small businesses between 2003 and 2007, spending the proceeds on prostitutes and holidays.

Ringleaders Lynden Scourfield and consultant David Mills were jailed for 11 and 15 years respectively earlier this year. Michael Bancroft and four others were also locked up, with the total sentences adding up to nearly 50 years behind bars.

HBOS workers (L-R) Michael Bancroft, David Mills and Lynden Scourfield were jailed for destroying small businesses and spending the proceeds on prostitutes and luxury holidays

HBOS was bought by Lloyds for £12billion at the height of the financial crisis in 2008 – and victims started writing to its board even before the deal went through to explain what was going on.

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But instead of launching a scheme to compensate those who suffered, they say the lender tried to repossess their homes or buy silence.

Thames Valley Police launched a criminal investigation in 2010, which eventually saw Scourfield and his cronies jailed.

A police memo accused Lloyds of leading officers a 'merry dance' during their investigation and held it up by making it as difficult as possible to access documents.

Now, Anthony Stansfeld, police and crime commissioner for Thames Valley, has attacked Lloyds for its actions and alleged cover-up.

'For ten years, Lloyds knew a massive fraud had taken place within the Reading branch of HBOS,' he wrote in a letter to the Financial Times.

'Throughout that period the bank conducted aggressive attacks on the personal guarantees of those defrauded.

Even when Lynden Scourfield pleaded guilty, the bank refused to talk to those it had defrauded for several further months.'

Stansfeld was responding to a previous FT letter from Lloyds' chief executive Antonio Horta-Osorio and chairman Lord Blackwell which claimed distress was 'prolonged by the length of time taken by the police investigation and subsequent trial'.

Stansfeld said: 'The only reason the police investigation took so long was the lack of full-hearted support from Lloyds.

'For Lord Blackwell to attempt to blame the police for the length of time the case took is unacceptable.'

When the convictions were handed down, the bank set up a £100million compensation fund.

Several victims have said this is not enough and are wary of handing over information they have gathered on the fraud to the bank.

Stansfeld said that although some of the smaller victims may have been given cash, none of the larger ones had received what they were due.

Lloyds said it had paid 26 compensation claims and made nine more offers. It has also launched a judge-led review into a possible cover-up at the bank.

RBS REPORT PROBED

A barrister is to examine the Financial Conduct Authority’s secret report into Global Restructuring Group.

The small unit in Royal Bank of Scotland was accused of asset-stripping during the financial crisis.

However, despite the full report being leaked last month and revealing mistakes by RBS, only a summary can be published because of confidentiality rules.

The Treasury Select Committee has appointed Andrew Green QC to compare the full report with what is in the summary, to ensure it is accurate.